Source
r/AusFinance•
Urbicus

First home buyer getting cold feet.

Property

Hi as per title Im in a sort of strange position. Ive got a okay paying full time job making roughly 100k a year. My expenses are rather low. Recently my rental lease ended and Ive veen dabbling into the idea of home ownership.

Ive found my ideal block of land and builder and the total price Im looking at needing to fork out is about 500k.

My big issue is that I dont have a huge deposit but my parents are willing at putting their home up as guarantors.

Through my mortgage broker it looks like I can secure a loan through westpacs flexi first homeloan with this method. Im close to submitting it all but Ive been stressed as of late thinking about all the what ifs.

Am I stressing out over nothing... or am I going about things the wrong way?

Posted Oct 22, 2019, 5:31 AM UTC

2167
FutureSynth•

Why build? There are so many Facebook groups of people angry at how terrible and soul crushing the process is.

Buy established.

46
BangazNHash•

Or... wait, like a smart person, to get a decent deposit.

Downvote me all night long guy but I’m an accountant and that’s fucking terrible advice.

You wouldn’t sit there and contemplate if some guy with $100k debt should buy a brand new Audi or a brand new Mercedes when they come to you for financial advice. You recognise that taking in additional debt is a stupid move.

Just like you don’t debate if the guy with 0 deposit as the RBA is discussing quantitative easing should buy established or a home and land, you tell them to wait a year

49
TheWololoWombat•

I disagree with the above. I’ve bought 6 houses, all with 5% deposits with LMI and all have gone up (capital growth) much faster than I could’ve saved...

Best time to buy is now I think.

-29
ralphiooo0•

🙄

7
TheWololoWombat•

Why the negs? Tall poppy syndrome or disbelief? Just trying to help...

Heaps of metrics say now is the right time to buy...

-6
3rd_in_line•

I would agree with this. Also if you look at the newer developments in western Melbourne, they have a whole lot if social, transport and other problems that you really don't wamt to be a part of in the future.

7
vBocaj•

I know people who built and the house cracked open because of the land being filled with dirt and not sitting for long enough. The dirt underneath settles and the house cracks all through it.

If you are going to build make sure you know exactly the quality of it is. Building can be so stressful and it’s easy for shit to go wrong. Be straight forward with the tradies too.

6
[deleted]•

[removed]

1
letswai•

buying establish OP is going to loss out First Home Owners Grant benefit.

-10
FutureSynth•

Who gives a fat fuck? The price you pay long term for diving debt first into a new estate surrounded by other kids borrowing Way Too Much is stupid.

28
Alect0•

I don't see the point of FHOG - buying new will be more expensive (more than 10-20k difference with a similar house plus the blocks of land are tiny these days) PLUS you get the stress of going through a build.

That does not seem worth it to me for 10-20k.

14
Grunewalder•

I’d prefer to forgo that and buy established. Would never build.

7
dylang01•

That and you have to live with other people decisions. If you build, yeah it can be more of a hassle, but you get the house YOU want. You can choose almost everything with very little compromise. Outside of price restraints that is.

5
FutureSynth•

If the dream house you want is something built by rushed tradespeople, full of cracks, on non-compliant foundations surrounded by other poorly made houses in an estate full of kids who can’t afford their mortgages then WHOA what a good time to be alive.

20
dylang01•

You do know not all new builds are in greenfield estates with commodity houses.

Even in those greenfield estates it is possible to build a nice house.

5
prof_smithburger•

Or, you can educate yourself before jumping in to make sure the house is build not just to spec, but beyond spec. Spend money on a decent independent inspector. Ask them before you start building what to look out for, they will have seen it all before. Get them to check the drawings before you sign them. Even pay for your own engineer to check the engineering drawings before you sign. Pay for a raft slab, not a waffle slab. Put in extra piers, etc etc.

2
ammenz•

There are questions you must answer yourself:

  1. Where do I see myself in 10 Years? In 20? In 30?
  2. Do I like my job? Will I be doing this job for the next 10 years? 20? 30?
  3. Is there any chance the company I work for will go bankrupt in the next 10 years? 20? 30?
  4. What if instead of building a house I start looking for established dwellings?
  5. Would I be able to pay my mortgage repayments if I break a leg and stay out of work for few months?
  6. What if several unexpected expenses happen all at the same time (dentist, major car service, unexpected pregnancy...)?

The only tip I have is, with your level of income, you can rent somewhere for the next 2-3 years and still save for a 20% deposit without bothering the parents to be guarantors.

36
UrbicusOP•

Most of my answers to those questions are positive.

My only concern is that I will not find a similar block of land in the future. Since most new areas opening up are further abd further away from the city.

6
3rd_in_line•

Fear of missing out is a huge psychological factor. But it shouldn't be a major factor in the decision making process.

And the points that the previous poster was making is that buying a house is a long term decision. Once you commit to it, you are stuck with it long term.

You might say "fine", but if you are young and haven't established your career or family, things can change pretty quickly. A job opportunity comes up the other side of the city/country/world, or you meet a nice partner, or you become a parent, or any other number of things that could happen, but your main financial and emotional commitment is a house that you are deep into debt with.

For any decisions I want make, if my answer comes back "I'm not sure" then that means "no". sure, I can do research and get more information, but until I am absolutely sure that the answer is 'yes", then I am going to default to "no". This is especially true for major decisions.

Good luck.

22
lethalforensicator•

You're not stuck with a house long term.

I bought a house in 2013, sold in 2017 and bought a bigger place a few months later. I'm going to be in this house for 5 years max, then I will sell up and move.

It's only a long term thing if the market tanks and you're in negative equity. Otherwise you just pickup the profit and move on when you decide the time is right.

Plus 500k loan, if that's what OP needs, isn't a huge amount on the monthly repayments, most of that will probably be covered in rent if they wanted to go down that option

0†
3rd_in_line•

Congratulations on having your life going well. But for the first time home buyer, they need to think long term. The decision to take a large mortgage (and in the OP's situation, having parents help out), should not be taken lightly. It will effect every major decision you make, so need to plan ahead as you have this commitment that will need to be considered when any other major decision passes your way. Yes, you are stuck with it. And if you plan right, then you will be okay. But if you don't think ahead, it could be something that costs you money and opportunities. Everyone is different and some people have planned well, succeed and are able to buy and sell every five years just like you have.

But buying a house is the largest financial decision most of us will make, so you need to have your shit together, think ahead and be sure you want to make such a commitment.

8
75mark•

Don't know why this is being downvoted. Its as if PPl think you cannot onsell a house after purchase

1†
[deleted]•

[removed]

1
qa_rocks•

And cash flow with IR at long term averages, just in case.

1
calicoshore•

Not fair to put your parents at risk. Keep saving until you can afford to buy/build on your own two feet.

Also, seriously reconsider building. It’s not a straight forward process and will almost certainly cost more and take longer than you expect.

Buy established and consider a build down the track when you have property experience and more of your own $.

21
BangazNHash•

Here’s one thing that too many young Australians ignore, also too many older ones. In fact, many fucking people are oblivious to a simple fact. Interest rates move but don’t go below 0%, or realistically 1% for that matter as banks aren’t just going to let you get a loan for free. That means your margin of favourable interest rates are 1, maybe 2%, over a 30 year mortgage.

Want to know what the margin of unfavourable interest rates are? Unlimited.

People look at the property market today, at today’s interest rate, then ask themselves “can I afford this” but they are missing the point.

Can you afford this loan at 5,6,7,10,15% interest? Over 30 years? With no deposit?

Because realistically the interest rate 40 years ago was 17%, it’s now .75%, these things change, but the RBA won’t be -16.75% in another 30 years. You hear what I’m saying?

You can’t predict the market, even though every single economical shift over the past 5 years has come to a head and the likelihood of you getting totally fucked in the ass for buying in 2019 is almost certain. But even if you didn’t know the market in any way shape or form, what are the odds of Australia’s lowest interest rate, being steady for three decades?

Either you’re banking on our economy being the worst it’s ever been for 30 years straight or your decision to buy right now with no deposit will fucking burn you later.

Or making $100k a year, you don’t impulse buy the biggest purchase in your life and build your 20% like a grown up

19
OXABCDEF•

but the RBA won’t be -16.75% in another 30 years.

Lowe: hold my fuckin beer

14
Alect0•

I think if you can pay back your mortgage at much higher interest rates and want to own a PPOR it's a pretty good time to buy one as you can repay well above the repayments and get your mortgage down quickly during a low interest period.

6
BangazNHash•

Oh I agree a teeny bit with you but we’re discussing a dude that makes $100k a year that can’t even wait to get a deposit together. This isn’t the type of person making early repayments.

To counter your point anyway there are two solid drivers for property price increases. Decreases in the interest rates and banks lending out larger balances. Interest rates can’t get lower (not really), banks have their hands tied trying to lend people the 2017 balances they were negligently throwing around. So sure, you could buy now, with the low interest and rush to pay off the principal before the interest rates increase by too much, but it’s also just as likely that by the time it’s paid off, it’s worth less than the money you bought it for

9
Alect0•

It could be worth less but that's difficult to predict as so many factors in play (more than the two you listed) plus I think a PPOR is a very different decision to an IP as there are non financial factors at play as well. Also depends on the type of property you buy and how long you're planning to stay.

I guess I'm cautious about it always being a good idea to wait until housing crashes (like I see advised here) because of the long term pressure it puts on rent (my family is Irish so pretty familiar with how that played out and how it still is with rent being so high now due to the construction contraction caused by the crash) plus it can be cheaper to pay off a house that cost more at low interest rates than to buy a house at a lower cost with a higher interest rate. How does one determine the best time to buy if they want to own their own home given all the factors involved? I think it's only something you can determine with hindsight. When I bought a house with my husband we both said this is either a great financial decision or a terrible one, time will tell :p

But yea I don't think my example is relevant to the OP.

4
Gman777•

You’re right, which is why the banks shouldn’t have loosened lending most recently, and should have stuck to assessing against longer term average interest rates.

Too many people in a hurry to take on life crippling debts, government and banks happy to encourage it.

People maxing out what they can borrow at unsustainable record low rates can’t be a good idea.

2
[deleted]•

That’s technically true, but everyone is in the same boat and the RBA isn’t going to jack up rates while it’s economic suicide. They’ve painted their way into a corner.

Also, the only way rates would get that high is if there was hyperinflation at which point your wage and the value of your asset would have increased significantly compared to the value of the loan.

2
BangazNHash•

If the RBA had half a brain they’d put interest rates up, not down

0
twittereddit9•

A property returning 30,000/yr at 3% cap rate is worth $1,000,000

At 2% cap rate it's worth $1,500,000

0
go_do_that_thing•

Yeah but back when it was super high the RBA was fairly inexperienced. I'd be suprised if it ever got that high again. IMO it may max out at 10-11%, but only briefly. This is based on nothing but a hunch.

-5
BangazNHash•

Renew lease. Just because you just “dabbed” into the idea of home ownership doesn’t mean that to only time you could possibly buy a house is between now and when your lease is up.

I’m an accountant and there’s no fucking way I’d buy a house right now, ESPECIALLY with a shit deposit, I’d want at least 40% down before I’d even think about it. I mean my sister finally justified buying an apartment and her loan is $200k, even then she was on the fence.

People on here have a now or never attitude and that’s just fucking silly, you literally have all the time between now and death to decide if it’s really a good move, don’t take that time for granted

18
deadhead-steve•

Holy shit an "ok full time job about 100k a year" that's not an "ok" job that's fucking fantastic!

4 years at tafe to end up a qualified tradie making 40k a year.

There is currently no profit in buying and selling a house, so I personally would save it and stick to renting

17
tw272727•

100k in Melbourne or Sydney is ‘just okay’

6
UrbicusOP•

Am in Brisbane. Its a comfortable amount to live on.

2
evilsync•

I need to stop reading whirlpool forums that make me think I'm not earning much.

2
rtk42•

About 65 after tax. A mortgage of about 35k plus your annual expenses....your cashflow will be near 0

1
UrbicusOP•

I may have rounded down my income due to not including things like overtime. My income after tax last year was over 80k.

3
FrugalBumblebee•

You can afford to save up for a deposit without putting your parents finances at risk. I'd save, and get where you want with time.

15
BangazNHash•

Seeing your edit I’ll say this and I know a ton of people do it but just because a group of people are stupid doesn’t mean you need to play follow the leader.

If you need your parents to garentee your loan, you’re not fucking ready to buy, simple. If you can’t even be patient enough to get a deposit then quite frankly you’re just not ready

10
tw272727•

Why the need to swear

-4†
BangazNHash•

Because I’m a product of nurture, nature and a million other events that made me who I am and sometimes as a result of that I like to write fuck, shit and a myriad of other words. It’s a word, it’s not going to kill you

4
tw272727•

No it’s not going to kill me, however you wrote a good comment and throwing a random fuck in there detracts from the message you try to convey - it comes off a bit childish/immature

0
nukemelbourne•

this is fucken australia mate, if he didn't throw the fuck in there then you'd be concerned

7
BangazNHash•

No it doesn’t, that’s how you’ve decided to interpret the word fuck.

When I was a kid my grandma said it was disgusting to eat with my mouth open. So I stopped, but over time I started to be disgusted when other people ate with their mouth open, almost irrationally angry about it, to the point where I food courts I’d mutter “disgusting” and find a new place to eat.

Then I got older and travelled around Asia and realised that they don’t have that custom, it’s pretty common for people from Asian backgrounds to eat with their mouth open. I started to realise that just because my cultural upbringing said eat with your mouth closed doesn’t mean it’s okay, that other people’s upbringings and beliefs aren’t worse than my own. Then I got a little bit older and realised, you know what? Why do I give a fuck at all, how people eat is literally none of my business, in any sense.

So just because you think swearing is immature, childish and diminishes a message doesn’t mean it does, it just means that you think it does. Now I’m a high school drop out, I’ve worked at the biggest accounting firm in the world, I’ve worked face to face with the CEO of commonwealth bank, and I’ll tell you right now that the word “fuck” was not foreign in meetings with clients. Just because you think you’re morally superior cos you limit your vocabulary makes you delusional, if anyone here is childish, it’s you are your antiquated judging techniques

2
gixer24•

Work out what the mortgage repayments would be and instead of buying the house, save that money each month, more even. Do it religiously for the next 2-3 years then reassess. You will be in a far better position financially and there’s no need to risk mum and dads house.

3
go_do_that_thing•

If you follow through with this i'd love to hear updates

2
UrbicusOP•

Sure thing!

2
go_do_that_thing•

Well looks like you just earned yourself a subscriber!

1
holman8a•

A lot of people seem negative about using your parents for a guarantee. If you have high income but are young so haven’t had time to save a deposit it makes a lot of sense.

I’d rethink Westpac unless you’re already banking with them and don’t want to change, they’re definitely not the cheapest!

2
UrbicusOP•

Out of curiosity. Do you have any suggestions?

1
[deleted]•

[deleted]

1
deadhead-steve•

Seems like I'm living in the wrong state!

1
[deleted]•

[deleted]

1
KiwasiGames•

You sound young... are you still single?

If so I wouldn't bother buying. Partners (and kids) can dramatically change plans. Careers can also change dramatically at this age. Its easy to leave you stuck with an expensive asset that is a pain to manage and slow to offload.

(If you aren't young and single, ignore this advice.)

1
Maddog800•

If you can't pay your parents will lose their house..don't do it.....rent get decent deposit, get emergency fund...then buy or build. Financially you are not ready

Your gut it telling you that as well, hence cold feet

1
Ref_KT•

OP I'd wait to save a decent deposit first.

I'd especially consider working out what repayments are like on the amount you are looking to borrow and start putting that aside every pay instead.

If you're parents want to help - consider moving back in with them and paying nominal rent to save for that deposit.

No way I'd ever ask my parents to go guarantors.

Also you may think it'll be 500k for the total. But there's always additional costs (letter boxes, washing lines, landscaping, random other stuff you probably haven't thought about). Plus you could move in and then your washing machine breaks or you car needs some major repairs. Not much of a deposit sounds like no emergency fund for this stuff.

Do you have a time limit you must build in on this block you are looking at?

1
[deleted]•

[deleted]

-2